Fachbereich Wirtschaftswissenschaft

A Systematic Reassessment and Meta-Analysis of Wellbeing Research

with Caspar Kaiser (University of Warwick)

Fierce debate over the feasibility of cardinally measuring utility – or ‘wellbeing’ – with surveys has recently resurfaced. Several prominent papers claimed that when interpreting survey data as strictly ordinal, most of the literature’s results are easily reversed. We systematically assess this claim. To do so, we replicate the universe of wellbeing research published in top economics journals since 2010. In total, we replicate 35 studies, containing 9,183 coefficients. For all coefficients, we assess whether signs of regression coefficients are invariant under all positive monotonic transformations of the scale with which wellbeing is recorded. About 40% of results cannot be reversed with any monotonic transformation of the scale. Comparatively low reversal risks are observed for the effects of income (19%) and unemployment (8%) as key wellbeing determinants. Once we allow for a mild degree of heterogeneity in mean wellbeing within response categories, these figures increase. To aid the robustness of future wellbeing research, we also estimate models of reversal risk. Generally, reversal risk decreases drastically with the statistical significance of the original estimates. Keeping everything else constant, the risk of reversal of an estimate that is statistically significant at the 1% level is 10 percentage points lower than that of an estimate that is significant at only the 5% level. Likewise, estimates with a clear exogenous and causal identification strategy also have a significantly lower risk of reversibility.

Faith-Based Organizations as Platforms

with Amma Panin (Université catholique de Louvain), Eva Raiber (Aix-Marseille School of Economics) and Paul Seabright (Toulouse School of Economics)

We propose and develop a new model of religious organizations as multi-sided platforms. Platforms are intermediaries that create benefits by putting different users in contact with each other, and they typically appropriate as revenues some share of the benefits they create. We argue that religious organisations broadly offer two types of services: (I) A religious service that includes providing a moral narrative, giving moral guidance counselling, and providing a space to access the divine (e.g. through prayer, meditation and ritual), and (II) a networking service that allows members to connect with other members that come primarily for the religious service. These connections can be for a range of reasons including business, finding a spouse, or sharing risk. By offering both services at the same time, religious organisations benefit from the spill-over effect of the religious service which helps to screen for trustworthy network members. They can thus price the services higher than if they were offered separately. The optimal community size depends on the type of network service the organisation provides which can explain the co-existence of small and large religious communities with the same price levels. It can also explain the existence of large religious communities that charge high prices.

Social Structures: Design, Determinants and Implications

We document gender differences in networks. Men have, on average, a higher number of connections relative to women. In contrast, women possess denser networks. We explore the implications of these network differences on performance on the job theoretically. More connections are particularly valuable in uncertain occupations, such as Academia. In Economics, accounting for gender differences in collaboration networks reduces the gender gap in economic publishing by at least 18%.

Job Loss and Political Entry

with Aiko Schmeisser (University of Potsdam)

The supply of politicians affects the quality of democratic institutions. Yet, little is known about how economic trade-offs motivate individuals to enter political life. This paper investigates how experiencing a job loss affects individuals’ decision to join politics and studies the consequences of layoffs for the selection of politicians. Using administrative data on the universe of formal employees, party members, and local political candidates in Brazil, and relying on mass layoffs for causal identification, we show that job loss increases the probability of joining a political party and running for local office. Moreover, we document that layoff-induced candidates are positively selected in various competence measures, suggesting that economic shocks may improve the quality of politicians. Heterogeneity analyses reveal a more pronounced increase in candidacies for laid-off individuals with higher financial incentives from office holding and larger predicted income losses. In addition, we find that being eligible for unemployment benefits after job loss also increases party memberships and candidacies. These results are consistent with the reduction in private-sector opportunity costs and the increased time resources explaining the rise in political entry.

Why Do Taxpayers Bunch at Notch Points? Experimental Evidence

with Irene Buso (University of Bologna), Anna Marenzi (University of Venezia) and Dino Rizzi (University of Venezia) 

Fiscal policies frequently determine discontinuities in the average tax rate; for example, introducing fiscal benefits or flat-rate tax for those who report an income below a threshold produces a large discontinuous jump in tax liability – a notch – at the threshold. These notched tax schemes create strong and salient incentives to bunch below the threshold, either reducing their work or increasing non-compliance behaviour. Empirical evidence consistently reports a density hole above the notch point in the taxpayers‘ income distribution, but less than theoretically expected (e.g., Kleven and Waseem, 2013); experimental evidence supports the existence of bunching behaviour but not to the full extent what questions the understanding of incentives in notched fiscal systems (Gibson et al., 2019). More importantly, the empirical studies on bunching can hardly distinguish whether the bunching observed in reported income is due to an adjustment in labour supply or to misreporting.

We provide evidence of taxpayers‘ responses to incentives produced by the notch in personal income taxation in a controlled setting; we investigate how tax evasion possibilities influence bunching.  Four between-subject treatments with 90 subjects each are implemented in the laboratory: the earnings of a real-effort task based on sliders (Gill and Prowse, 2012) are taxed with (i) a proportional scheme without evasion possibilities, (ii) a proportional scheme with evasion possibilities (iii) a notched scheme without evasion possibilities, (iii) a proportional scheme with evasion possibilities, (iv) a notched scheme with evasion possibilities.

Results show clear evidence of bunching: bunching emerges in notched tax systems both with and without tax evasion. Furthermore, tax evasion possibilities do not crowd out labour supply adjustment: taxpayers react to notches by adjusting both effort and reported income.

Minimum wages and unemployment insurance in a federation of states

with Max Friese

In a federation of states with partial mobility of households and firms we analyze four different regimes of de(centralized) minimum wage setting and de(centralized) unemployment insurance. Unemployment insurance is always efficient by decentral decisions. In contrast, for symmetric states minimum wages are set efficiently only, if it is organized centrally. Decentralized minimum wage setting appears to be generically inefficient, because the decision makers either externalize the cost of unemployment via the pooled insurance budget or exploit migrational externalities. Only with full mobility, the opposing migration effects outweigh the pooling effect. Our results suggest that contrary to insurance which can be efficiently organized decentrally, a pure redistribution like minimum wages should be centralized.

Uncovering Disaggregated Oil Market Dynamics: A Full-Information Approach to Granular IV

with James D. Hamilton (University of California, San Diego)

The world price of oil is determined by the interactions of multiple producers and consumers who face different constraints and shocks. We show how this feature of the oil market can be used to estimate local and global elasticities of supply and demand and provide a rich set of testable restrictions. We develop a novel approach to estimation based on full-information maximum likelihood that generalizes the insights from granular instrumental variables. We conclude that the supply responses of Saudi Arabia and adjustments of inventories have historically played a key role in stabilizing the price of oil. We illustrate how our structural model can be used to analyze how individual producers and consumers would dynamically adapt to a geopolitical event such as a major disruption in the supply of oil from Russia.

Climbing the Ivory Tower: How Socio-Economic Background Shapes Academia

with Ran Abramitzky (Stanford University), Lena Greska (Ludwig-Maximilians-Universität Munich), Santiago Peréz (University of California, Davis), Joseph Price (Brigham Young University) and Fabian Waldinger (IZA Institute of Labor Economics)

This paper explores the impact of socio-economic background on academic careers in the United States. We construct a novel dataset that links the near-universe of US academics to full-count censuses, allowing for a comprehensive analysis of the relationship between parental occupation, socio-economic status, and academic outcomes. We document a severe underrepresentation of children from lower socioeconomic backgrounds among academics. We also document significant variations in socio-economic selectivity by academic discipline and university. Conditional on making it to academia, there are no differences in careers and scientific productivity, indicating that the initial selection process may play a crucial role in determining one‘s academic success. Additionally, we show that socioeconomic background influences a scientist‘s choice of subfield and, thereby, the direction of research.

Navigating the Amazon: The Incidence of Digital Service Taxes

with Rohit Reddy Muddasani (Vienna University of Economics and Business)

Large digital firms pay little profit tax in many countries, prompting several countries to introduce digital services taxes on these firms to indirectly tax their profits. We study the incidence of digital service taxes using data on Amazon, the largest online retailer. We find that Amazon increased its fees by almost the exact amount of the digital service tax. Firms using Amazon as a platform have largely been able to pass these increased costs onto consumers. On average, the incidence of digital service taxes falls almost entirely on consumers, though there is significant heterogeneity among countries.

Working hours and workers’ health: Long-run evidence from a nationwide policy in Sweden

with Martin Karlsson (Universität Duisburg-Essen) and Nikolaos Prodromidis (Universität Duisburg-Essen)

Regulating working hours is one of the oldest concerns of employment legislation due to its importance for protecting workers‘ physical and mental health and maintaining labour productivity. We provide new evidence for the causal effect of reduced working hours on mortality using full population register, exploiting exogenous variation from a massive nationwide policy in Sweden that reduced the working hours from 56 to 48 hours for about 1 in 4 salaried workers. Exploiting variation across occupations using difference-in-differences and event-study models, we show that lower working hours decreased mortality by around 20\%, with effects primarily driven by reductions in heart diseases and workplace accidents, and increased longevity of affected workers by around 0.6 years. Our results imply that many lives could be saved worldwide by reducing excessive working hours for labour-intensive occupations.

The golden leap: unveiling gender differences in the Matthew effect

with Jennifer Doleac (Arnold Ventures), Myra Mohnen (University of Ottawa)